SunTrust agrees to $320M settlement over mortgage modifications

Atlanta-based SunTrust Banks has agreed to a settlement of up to $320 million to resolve a criminal investigation into the lender’s treatment of applicants to a federal mortgage-assistance program, according to a deal announced Thursday.

SunTrust had been accused of mismanaging the Home Affordable Modification Program from 2009 to 2010, causing harm to thousands of borrowers who applied for the program.

HAMP, part of the federal bailout program, is designed to reduce monthly mortgage payments for struggling borrowers and prevent foreclosure.

Federal authorities said they began investigating SunTrust after receiving complaints that the lender misled homeowners who had applied to it for a HAMP loan modification.

According to the complaints, SunTrust made “misrepresentations and omissions” to homeowners, including on how long the lender would take to decide whether borrowers qualified for HAMP. Among other things, the lender was also accused of failing to have an effective system to process HAMP applications in a timely fashion.

“We recognize that there were deficiencies in our administration of HAMP during the recession,” Jerome Lienhard, president of SunTrust Mortgage, said in a statement, adding that the lender has made improvements to its internal processes.

SunTrust has agreed to provide up to $274 million in consumer remediation, $20 million for housing counseling for homeowners, $10 million in restitution to Fannie Mae and Freddie Mac and a cash payment of $16 million to the Treasury Department, under the agreement with the U.S. attorney’s office for the Western District of Virginia.

The settlement will result in a $204 million pretax charge that will affect SunTrust’s second-quarter results, the lender said.

SunTrust is the fifth-largest bank by deposits in the Charlotte metropolitan area.

It’s the latest mortgage-related settlement for the lender.

Last month, authorities announced a nearly $1 billion national settlement with SunTrust to resolve alleged abuses in mortgage and foreclosure practices. North Carolina homeowners are expected to receive up to $21.5 million in loan modifications and other relief as part of that deal.